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Romania: Young people and temporary employment in Europe

Observatory: EMCC

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Published on: 08 December 2013

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In the economic crisis context, the difficulty for young persons to find a job, and a secure one if possible, has increased in the 15 to 24 age segment, with unemployment rate among this group currently being over three times higher than the national average. In addition to young people on the record of unemployment agencies and recipients of unemployment benefits, there are a lot of others featuring in official statistics as unpaid family workers, or as self-employed. In 2011, they were estimated to amount to 300,000 persons, while the official jobless totalled some 50,000 persons. The former are particularly vulnerable due to the lack of access to unemployment benefits, and to the very slim chance of finding a job, even temporary. The main concerns of the social partners are, as a rule, the rights of the employees. The changes made to the labour legislation in 2011 brought about a flexibility of the labour market that makes it even harder for yong people to find permanent employment.

Introduction

Youth unemployment has been a persistent problem in many parts of Europe for many years. Over the past 3-4 years, however, since the onset of the financial crisis and the economic recession which followed, it has become an even greater and more widespread problem and one which, given the on-going depressed state of the European economies, is likely to remain for some time to come. The latest monthly figures (for September 2012) show the unemployment rate of those aged 15-24 averaging 22.8% in the EU – just over 1 percentage point higher than at the time a year earlier. In Spain, the figure was over 54% and in Greece, 57%, in both cases, much higher than a year earlier. In the worst affected countries, therefore, as in most Member States, there is very little sign of any easing of the youth unemployment problem. There are, however, a few exceptions. In Germany, in particular, youth unemployment has declined since the global recession hit in 2009 and now stands at only 8%, well below the level it was before the recession. In Norway too, the rate is only 8%, though this is slightly above the level in 2007 before the crisis. Germany, apart, there are two other countries in the EU with youth unemployment below 10% according to the latest monthly figures - the Netherlands (9.4%) and Austria (9.9%). As in Norway, in both cases, the rate is above the pre-crisis level.

Moreover, young people who do manage to find jobs often have to settle for a temporary one, defined as one with a fixed-term contract of employment. According to the European Labour Force Survey (LFS), in 2011, just under 43% of employees under 25 were in temporary jobs in the EU and well over half in Germany (56%), France (55%), Portugal, (57%), Sweden (57%), Spain (63%), Poland (66%) and Slovenia (75%). (In Norway, the figure was much lower than in most EU countries, at around 24%.) While around 40% of the young people concerned on average were in temporary jobs because they had a fixed-term training contract and another 9% were on probationary contracts, a substantial proportion (37% on average) were in temporary jobs because they were unable to find permanent ones. In the Czech Republic, Cyprus and Portugal, this figure was over 75% and in Spain and Slovakia, well over 80%.

Among young people making the transition from education or initial vocational training into employment, the proportion who take up temporary rather than permanent jobs is much higher than for the age group as a whole. In 2011, 57% of those aged 15-24 in employment who were in education the previous year were in temporary jobs in the EU and 86-87% in Spain, Portugal and Poland. For those moving from unemployment into employment, the proportion who take up temporary jobs is even higher on average in the EU (61%) as well as in Spain (90%).

The fact that a relatively large proportion of young people in employment are in temporary jobs may be a reason why they have been hit disproportionately hard by the crisis. In the economic downturn in 2009, many of the people who lost their jobs first were on fixed-term contracts since not renewing these contracts represented the easiest way for employers to reduce their work forces. In 2009, therefore, there was some decline across Europe in the proportion of young people in work employed in temporary jobs (see the Tables attached to the questionnaire). Since then, there has been some tendency for the proportion to increase again, in part perhaps because employers are reluctant to take on people on permanent - or standard – contracts given the uncertainty about future economic prospects.

Given the above, it is understandable that there is growing public interest, and some concern, over the nature of the jobs that young people are taking up. This concern is mirrored at EU-level where a ‘flexicurity’ approach to labour market policy has increasingly been advocated, which, in practice, means that while flexibility is an important objective, it needs to be accompanied by protection of workers’ interests if it is not to lead to a growth of precarious employment in low quality jobs. Accordingly, there is a need to obtain a better understanding of the terms and conditions applying to temporary jobs, the extent to which they are a stepping stone to permanent jobs and a working career in line with a person’s qualifications and capabilities, the access to social protection which comes with them and the measures in place to encourage employers to convert them into more stable jobs. These issues form the focus of the present study.

Definition of temporary jobs

The interest in the study is in all young people employed in temporary jobs of whatever kind, in the sense of all jobs that they are not subject to a standard contract of employment which is normally one of indeterminate length, or at least one for which no specific length is specified. Such temporary jobs can be for a period of training (i.e. traineeships or apprenticeships) or probation, intended to enable employers to check the suitability or aptitude of people for the jobs concerned. They might also be to replace someone on maternity leave or on a training programme or they might relate to a specific project of fixed duration.

All such jobs and others which are of fixed duration should be covered, whether they are part-time or full-time and irrespective of whether they are specifically for young people (such as perhaps in the case of traineeships or apprenticeships) or for people of all ages which young people happen to be doing. In some cases, it should be noted, it is relevant to include, in addition, to temporary employees, the ‘bogus’ self-employed – i.e. those people who have self-employment status but who are contracted to work for a single employer and who are effectively similar to employees who have a fixed-term contract of employment. (The cases in question relate to instances where employers use self-employment contracts as a means of employing young people without bearing the costs, and obligations, of a standard contract of employment.)

Outline of study

The study is divided in three sections. The first is concerned with the main types of job in which young people who are employed under temporary contracts work and the reasons why employers choose to use temporary contracts of employment instead of standard ones when they take on young people, as well as with the link, if any, with labour market conditions (i.e. with the extent to which the crisis has led to an increase in temporary employment). The starting point is the data summarised above, derived from the LFS, which indicate the relative number of young people employed on temporary contracts in the different European countries and the way that this has changed over the recent past (these data, as noted, are set out in the tables attached to the questionnaire). Correspondents are asked to check these data against any national data on temporary employment and to indicate where these show a different picture from the LFS data, perhaps because a different definition is adopted of temporary jobs.

Any description or commentary on national statistics should, however, remain brief, since the main task of the first section, is to review and summarise relevant sources of information on the different kinds of temporary contract under which young people are employed in each of the countries, the circumstances and areas (the types of job and the sectors of activity) in which they tend to be used and the main reasons why employers adopt them.

The second section is concerned with the access to social benefits which temporary jobs provide, distinguishing between the various kinds of benefit, and with the extent to which entitlement to benefit differs for young people employed in temporary jobs from that for those employed under standard contracts of employment. It should be emphasised that the concern is not only with the formal regulations which apply, which in many if not most countries do not make a formal distinction between temporary jobs and others, but also with de facto entitlement which stems from the nature of temporary employment. In particular, young people in temporary jobs may have difficulty in complying with the need to have a continuous period in employment, or a continuous record of paying social contributions, in order to be eligible for unemployment benefit.

The third section is concerned with the measures in place to regulate the use of temporary contracts of employment (such as specifying the number of times they can be renewed), with the attitudes of government and the social partners towards their use and with the incentives which exist to encourage the wider use of standard contracts of employment and the conversion of temporary jobs into permanent ones. A particular point of interest is the extent to which regulations and attitudes as regards temporary jobs have changed over the crisis period as the number of jobs available for young people to take up has diminished and as expanding these has become a policy priority.

A final point to note is that while it is customary to define youth employment (and unemployment) in terms of those aged 15-24, it is also the case that many of those aged 25-29 are also employed in temporary jobs, as indicated in the attached tables. Correspondents are therefore asked to extend the coverage of the study to this age group where relevant. It is recognised that in some countries the statistics available may not relate precisely to the age groups specified here, in which case correspondents should report on the age groups nearest to these.

Questionnaire

1. Importance of temporary employment for young people

1.1. Do the figures shown in the attached tables (on the number of temporary employed as a % of total employees based on Eurostat LFS data) give a reliable indication of the scale of temporary employment among the young in your country and the way that it has changed over recent years? Are there young people employed in temporary jobs who do not show up in the Eurostat figures? Are there national statistics which show a different picture from the Eurostat data? If so, please indicate what they show and give the source of the data.

The records of the National Institute of Statistics (Institutul Naţional de Statistică, INS) show that, in Romania, the population aged 15 to 24 has decreased from 3.2 million persons in 2007 to 2.85 million persons in 2011.

The INS 'Household Labour Force Survey' (AMIGO) revealed the following distribution of this segment of population: employed - 779,700 in 2007 (24.4%), and 676,100 in 2011 (23.8%); unemployed - 6.1% in 2007, and 7.4% in 2011; students of all levels accounted for 55.9% in 2007, and 56% in 2011. Other categories of individuals in the same age group totalled 13.6% in 2007, and 12.8% in 2011.

Employment rate among youths aged 15 to 24 dropped from 29.1% in 2004 to 24.4% in 2007, and to 23% in 2011, while employment as a whole for the entire population aged 15 to 64 was 57.9% in 2004, 58.8% in 2007, and 58.5% in 2011.

Unemployment rate among persons aged 15 to 24 fluctuated from 21% in 2004, to 20.1% in 2007, and 23.7% in 2011, compared to the national average of 8%, 6.4%, and, respectively, 7.4%.

The distribution by occupational status of the youths in the segment 15 to 24 years of age, in 2011, was the following: employees - 55.7% (from 61% in 2007); employers - 0.3% (0.2% in 2007); self-employed - 10.4% (11.1% in 2007); and unpaid family workers - 33.5% (27.9% in 2007).

In 2011, of the total number of 376,700 employees in the age group 15 to 24 years, a number of 15,900 (4.2%) were working under a temporary employment contract (regulated by the Labour Code), and 17,200 persons (4.6%) were retained under other types of employment agreements. About 6,000 of them (1.6% of all) were under temporary employment (for freelancers/authorised persons, regulated by Civil Code).

1.2. Is there any evidence that other forms of employment are used as a substitute for temporary contracts, such as bogus self-employment where young people are contracted to provide services to a single work provider in a continuous manner so acting de facto as employees? If so, please give the source of the evidence and indicate the scale of the phenomenon in terms of the number of people concerned.

There are no statistic data in relation to approximately 365,000 individuals aged 15 to 24 who, in 2011, did not feature in any of the three categories: employed, unemployed, or students of all grades.

In 2011, the some 297,400 young people aged 15 to 24 reported as forming part of the employed population, were comprised of 70,600 self-employed, and 226,800 unpaid family workers.

These two types of young workers are particularly vulnerable. They have no access to unemployment benefits, and finding a job, be it temporary, is a difficult thing to achieve.

1.3. Please list (and give summary details, i.e. purpose and duration of the contract) the most common contract types or contractual arrangements under which young people are employed on a temporary basis (such as for traineeships, apprenticeships, probationary periods, replacement of workers on leave or projects of a fixed duration). What is the relative importance of each type of contract or arrangement in terms of the number of young people employed under them?

No statistic information is available with regard to the most widespread forms of employment contracts for the youth. From our personal knowledge, however, the popularity of the recently introduced apprenticeship agreements and temporary agency employment contracts is still low.

1.4. Please indicate the main reasons for the emergence and development of the different types of temporary contract which you have listed in response to question 1.3. To what extent are they linked to particular conditions in the labour market or employment protection legislation/regulation in your country? What is the main attraction of such contracts to employers? What effect has the crisis had on the use of such contracts?

Some of the amendments brought to the Labour Code in 2011, purporting to render more flexibility to the labour market, have resulted in more lax conditions for the fixed-term employment. While prior to the amendment of the Labour Code, temporary employment was permitted subject to very strict conditions, now employers have been given free hand to hire labour under temporary terms at their free will.

Before these changes were made to the labour legislation, employers could not fire an employee other than for very well grounded reasons permitted by law. The fixed-term and temporary employment contracts provided by the new legislation may become popular and gain ground among employers.

The relatively short time that has lapsed since the new provisions took effect renders any assessment of their effects impossible.

Besides, the temporary agency work agreements oblige employers to pay the employees under such contracts a salary at least equal to the minimum wage. Under the previous Labour Code version, employers were not allowed to pay a temporary employee less than the salary earned by the same employer's workers performing the same type and amount of work.

1.5. To what extent are temporary contracts a ‘stepping stone’ to ‘permanent’ jobs (or those with standard contracts of employment of undefined duration)? Are apprentices and trainees typically taken on by the companies or other organisations concerned on standard permanent contracts once they complete their training? Has the situation changed over the crisis period? Please summarise any relevant studies which have been carried out in your country or other evidence at the national level which exists and give the reference to them.

Although no studies or inquiries into the matter defined above have been found to exist, our opinion is that apprenticeship and fixed-term training contracts could be a launching pad towards permanent employment for the same job. Many students accept such temporary jobs during their studies in order to secure a permanent position upon completion. Employers, in their turn, are happy to have fresh staff already moulded to the specifics of their companies.

2. Access to social benefits

2.1. Does entitlement of young people to (contributory) unemployment insurance benefits and (non-contributory) unemployment assistance (i.e. benefits, usually means-tested, which provide a minimum level of income) differ if they are employed on temporary contracts as opposed to permanent ones? If so, please indicate briefly the differences in eligibility conditions and any differences between types of temporary contract (including those working as self-employed for a single employer). Have there been any changes over the period of the crisis?

Under the current legislation, the conditions young people in temporary employment need to fulfil in order to qualify for unemployment benefits are similar to those in permanent employment.

One difficulty temporary young employees may encounter is the condition to pay the unemployment contribution at least 12 months within the 24 months prior to the date of application for the unemployment benefit.

The length of the unemployment benefit period varies with the length of the applicant's contribution to the social security fund: 6 months for a contribution of at least 12 months; 9 months for a contribution of at least 5 years; 12 months for a contribution of at least 10 years. The unemployment benefit is equal to 75% of the worth of the social reference indicator for the persons that contributed at least 12 months (some 85 euro/month), plus an additional 3% for a contribution of minimum 3 years, 5% for at least 5 years, etc.

2.2. Does entitlement of young people to sickness benefits and maternity benefits differ if they are employed on temporary contracts as opposed to permanent ones? If so, please indicate briefly the differences in eligibility conditions and any differences between types of temporary contract (including those working as self-employed for a single employer). Have there been any changes over the period of the crisis?

According to Government Emergency Ordinance 158/2005, as subsequently amended and supplemented, sickness and maternity benefits for temporary employees are similar to those for permanent employees, provided they contributed to the social security fund at least one month within the past 12 months prior to the application for such benefit.

Due to the sharp need for revenues, the Government gave an ordinance which introduced, with effect from 1 July 2012, the compulsory social security contribution for persons deriving their income from free-lancing (self-employed, liberal professions, intellectual property rights), which previously were optional.

2.3. Are there any differences in the entitlement of young people to old-age pensions between those employed in temporary jobs as opposed to permanent ones? If so, please indicate what these are. Have conditions of eligibility to pensions changed over the period of the crisis (including through pension reforms introduced as part of a long-term strategy to improve the financial sustainability of the system)?

Retirement requirements do not differ from one type of employment to another.

To counteract the effects of the crisis, the new Public Pension Act 263/2010 provides contributions to the social insurance fund not only by employers, but also by employees, at a rate of 10.5% of their gross monthly salary.

The minimum length of the contribution to the social security fund that entitles the contributor to an age-limit pension is 15 years. The amount of the pension varies with the length of the social security contribution, the total amount of earnings, and the worth of the social security contribution.

Before the amendment of the Pension Act, the Government issued legislation regarding the creation of private pension funds, to which young employees are obligated to contribute.

2.4. Are there any differences in entitlement of young people to health care between those employed in temporary jobs as opposed to permanent ones? If so, please indicate what these are. Have conditions of eligibility to health care changed over the period of the crisis?

There are no differences between temporary and permanent employees in respect of their access to health care services.

3. Regulation of temporary contracts and policies to support transitions into permanent contracts

3.1. Please describe briefly the regulations applying to the main types of temporary contract in your country. Do restrictions exist on the maximum duration of the different types of temporary contract for young workers or the number of times they can be renewed? Do these regulations differ by age (i.e. between young people and older workers) and/or by type of temporary contract (as mentioned in question 1.3), by occupation, or by sector of activity? Do special regulations exist for those completing apprenticeships or traineeships? Have the regulations changed over the period of the crisis – i.e. has there been a tendency for them to have been tightened or relaxed?

According to the Labour Code Act 53/2003, as amended and republished in 2011, there are four temporary employment contracts:

fixed-term individual employment contract, which can be made to: replace an employee whose contract is suspended (except for the employees involved in a strike, whose jobs may not be suspended); cope with the temporary growth of business volume in the employer's company; recruit labour for seasonal business peaks; offer a chance to jobless persons; conduct special projects or programmes; etc.

A fixed-term individual employment contract may not have a duration of more than 12 months, and only maximum three such contracts can be made between employer and the same employee, for a total period that may not exceed 36 months.

The employer has the liberty to opt for a probation period of 5 to 45 days.

During the performance of the contract, the employer has the obligation to inform his temporary workers of any openings for permanent jobs that are or may become available in his company. The law does not allow employers to treat fixed-term employees any differently from permanent employees.

temporary employment contract, with a temporary work agencies, for a fixed term temporary assignment (performance of a precise, temporary, task); it can be made for a maximum period of 24 months, which may be extended for no more than a total period of 36 months.

Temporary employees have access to all the services and benefits that all the other employees enjoy.

The employer has the liberty to choose a probation period of 2 to 30 days, commensurate to the length of the assignment (2 days for a one-month assignment, 15 days for 3 to 6 months, 20 days for an assignment of more than 6 months, and 30 days for any management position.)

The law says that, upon completion of his/her assignment, the temporary employee may sign with the employer a permanent individual employment contract.

The length of the assignment is included in the total length of service to be considered for the future pay when, at the end of the assignment, the employee is retained for further employment.

apprenticeship contract for on-the-job training, by which the employer, in addition to paying the apprentice's salary (which may not be lower than the minimum wage), undertakes to provide the requisite conditions for the vocational training of the apprentice in his area of professional interest.

Such a contract is made for a definite period of time, for any persons aged 16 to 25 who do not have the appropriate qualification for the occupation open to training.

According to Act 297/2005, regarding on-the-job apprenticeship (republished in 2011), an apprenticeship contract may be made for a period of 12 to 36 months.

An apprentice's working schedule is of maximum 6 hours/day, and 30 hours/week for youths below the age of 18, and 8 hours/day, and 40 hours/week for youths aged 18 and over.

When signing the contract, the parties may agree that, upon its expiry, they continue to work together under an individual employment contract for the occupation for which the training was taken.

The law provides that the employer who is a party to an apprenticeship contract must give the apprentice all the rights arising for him from the law, the applicable collective agreement, and the relevant individual employment contract.

In 2011, with the financial crisis in full swing, the Labour Code was amended with a view, among other things, to relaxing the conditions governing the fixed-term and temporary employment contracts (RO1012039I).

special vocational training contracts, based on the employers' obligation to organise training courses, which can be made for employees (vocational training contracts, for a duration of 6 months to 2 years); and fixed-term training contracts for beginners, which may be signed for a maximum period of one year, concomitantly with the individual employment contract.

3.2. Do incentives exists in your country to encourage employers to opt for standard rather than temporary contracts of employment, to convert temporary contracts into permanent ones or to make it easier for employees to move from temporary to permanent contracts? If so, please briefly describe the form that these incentives take. Do they apply equally to young people as well as to older workers? Are any incentives in place to encourage employers to take on young people who have completed an apprenticeship or traineeship on permanent contracts? Have there been any changes to incentives over the period of the crisis? Are any such changes being proposed or being actively discussed at present in your country?

The Unemployment Benefit and Stimulation of Employment Act 76/2002 grants employers who hire fresh graduates of educational establishments (within 12 months of graduation) a one-year exemption from the payment of the contributions to the unemployment fund, and, for each such graduate, a monthly amount equivalent to between 1 and 1.5 times the value of the social reference indicator, pro-rata to the level of the studies completed. The social reference indicator stands at some 75% of the minimum wage.

The above incentives are subject to a continued employment relationship for at least 3 years. For each of the subsequent 2 years of continued employment, employers receive a financial benefit equal to the aggregate contributions owed to the state revenues for these employees (social security contributions for pension, health, labour accidents, professional hazards, unemployment).

According to the Apprenticeship Act, an employer who signs an apprenticeship contract may receive, upon request, a monthly amount equal to 60% of the value of the social reference indicator, from the unemployment security fund, for the entire duration of the apprenticeship contract. The employer is under the obligation to maintain the labour relationships with the apprentice for the entire length of the apprenticeship contract, without being under the obligation of any further employment of the apprentice.

3.3. Is the employment of young people on temporary contracts an important issue of concern for the social partners? Are there strong differences in attitudes and policies between employers and trade unions towards the use of temporary contracts? Have any initiatives been taken by the social partners, either jointly or separately, to encourage the use of permanent rather than temporary contracts? Have any specific initiatives been taken in respect of young people completing apprenticeships or traineeships over the types of job they are offered when their temporary position comes to an end?

In general, the issue the social partners are mainly concerned of the rights of employees. Before the amendment in 2011 of the Labour Code, the rule for employment was the open-ended individual employment contract, and the other types of contracts were the exception.

During the amendment phase of the Labour Code, and after it was promulgated, the employer organisations supported an increased flexibility of employment rules, and militated for a lift of the restrictions against temporary employment contracts, while the national trade union confederations objected to the loss of the safety of employment in favour of flexibility, and expressed their disagreement regarding amendments (RO1102049I, RO1202039I).

No information has been discovered with regard to initiatives of the social partners to encourage permanent employment of young persons, their main concern seeming to converge towards steps to secure employment for young jobless.

Luminita Chivu, Institute of National Economy, Romanian Academy

Temporary employees as a share of total employees aged 15-24, 2004-2011

% total employees

% point change

2004

2007

2009

2011

2004-2007

2007-2009

2009-2011

2007-2011

EU27

37.6

41.3

40.4

42.5

3.7

-0.9

2.1

1.2

BE

28.6

31.6

33.2

34.3

3.0

1.6

1.1

2.7

BG

15.3

10.3

9.3

8.3

-5.0

-1.0

-1.0

-2.0

CZ

18.0

17.4

18.7

22.3

-0.6

1.3

3.6

4.9

DK

26.9

22.5

22.8

22.1

-4.4

0.3

-0.7

-0.4

DE

55.5

57.4

57.3

56.0

1.9

-0.1

-1.3

-1.4

EE

:

:

:

13.8

IE

11.2

20.5

25.0

34.2

9.3

4.5

9.2

13.7

EL

26.3

27.0

28.4

30.1

0.7

1.4

1.7

3.1

ES

64.8

62.8

55.9

61.4

-2.0

-6.9

5.5

-1.4

FR

46.7

53.5

52.4

55.1

6.8

-1.1

2.7

1.6

IT

34.4

42.3

44.4

49.9

7.9

2.1

5.5

7.6

CY

16.1

23.3

18.4

17.2

7.2

-4.9

-1.2

-6.1

LV

17.3

9.3

9.3

10.7

-8.0

0.0

1.4

1.4

LT

13.8

9.8

5.0

9.1

-4.0

-4.8

4.1

-0.7

LU

24.1

34.1

39.3

34.5

10.0

5.2

-4.8

0.4

HU

15.1

19.1

21.4

22.9

4.0

2.3

1.5

3.8

MT

9.2

11.0

11.3

17.7

1.8

0.3

6.4

6.7

NL

37.9

45.1

46.5

47.7

7.2

1.4

1.2

2.6

AT

32.4

34.9

35.6

37.2

2.5

0.7

1.6

2.3

PL

60.6

65.7

62.0

65.6

5.1

-3.7

3.6

-0.1

PT

47.4

52.6

53.5

57.2

5.2

0.9

3.7

4.6

RO

6.6

4.6

3.7

5.8

-2.0

-0.9

2.1

1.2

SI

63.1

68.3

66.6

74.5

5.2

-1.7

7.9

6.2

SK

9.9

13.7

12.5

18.6

3.8

-1.2

6.1

4.9

FI

49.8

42.4

39.0

43.4

-7.4

-3.4

4.4

1.0

SE

53.1

57.1

53.4

57.3

4.0

-3.7

3.9

0.2

UK

11.0

13.3

11.9

13.5

2.3

-1.4

1.6

0.2

NO

31.2

28.0

25.7

24.3

-3.2

-2.3

-1.4

-3.7

Source: Eurostat, Labour Force Survey

Temporary employees as a share of total employees aged 25-29, 2004-2011